Small Business Owners Short On Optimism In Q4

A recent Gallup survey of small business owners shows that they plan to ride out the recession by cutting both jobs and spending. The quarterly survey, which was conducted in November 2008 and forms the basis of the Wells Fargo/Gallup Small Business Index, indicates that there is little room for optimism among small business owners who are attempting to survive the recession.

The index, which measures small business owners’ overall confidence in their operations, took a substantial plunge in the fourth quarter, falling 35 points to just ten. That mark is the lowest ever recorded by the index since Q3 2003, the first quarter in which the survey was conducted.

Slightly less than one-third of all survey respondents said that their revenues increased in the preceding twelve month period. In contrast, nearly one-half of survey participants experienced a revenue decline in the same period. Respondents also reported a corresponding decline in capital spending, with only one in five respondents reporting an increase in spending on equipment and facilities. Nearly four in ten respondents said that they have restricted their capital expenditures in response to the sour economy, and say that reduced access to capital in the fourth quarter was hurting their business.

More telling, slightly more than one in ten respondents say that they added personnel to their operations in 2008, and nearly three in ten have reduced staff in response to declining revenues.

While major employers make headlines by slashing thousands of jobs at once, the impact of small business is anything but small. According to the US Small Business Administration, nearly all of the nation’s employers are classified as small businesses, and provide slightly more than half of all private-sector jobs.

Some states aren’t waiting for the federal government to finish its stimulus package. They’re looking for ways to support their small business owners. Texas governor Rick Perry is proposing to eliminate state taxes on businesses that register less than $1 million in currently taxable revenue. The move is designed to encourage startup companies, and is seen largely as a win for companies in Texas, who paid nearly $83 million in taxes in 2006, just two percent of the state’s overall tax revenues, yet make up 80 percent of the state’s employing firms.

Photo Credit: Sigurd Decroos

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